If anyone can help me get a start formatting this correctly, I would appreciate it! Company A’s demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total $38 per order. The annual holding cost rate is 26% of the value of the inventory. The per-unit cost of inventory is $12.Company B’s demand is uniform throughout the year and totals 15,000 units per year. The production setup costs total $84 per setup. The annual holding cost rate is 28% of the value of the inventory. The per-unit cost of finished product is $19. The production rate is constant and equivalent to 60,000 units per year.A. Determine the order size for Company A in the given scenario that would minimize total annual cost by using the economic order quantity model. B. Determine the lot size for Company B in the given scenario that would minimize total annual cost by using the economic production lot size model

For A: q*= square root of 2KD/h I think that H=0.26 D=18,000 K=12 Am I on the right track?

May 31st 2013, 07:12 PM

jay1

Re: Need help getting started - EOQ question

Okay this is what I have for Part A (company A only), but I cannot figure out where the 26% annual holding cost rate comes in to play. Any help figuring where I left this out and how to include is greatly appreciated!
EOQ = √2UP / C
Where: U = Annual usage in units =18,000
P = Ordering cost per order = 38
C = Carrying cost per unit =12